Tools, Leverage, and Utility

There is a class of tech companies that became extraordinarily successful by building tools. Think of the Stripe, Microsoft, Salesforce, and others of the world.

The reason why tool companies tend to be great is that the amount of work an organization can get done grows approximately with the square root of the number of people in it.

Now, whether it’s square root, cube root, etc doesn’t matter. What’s important is that it isn’t linear, and as you grow you quickly get diminishing returns.

This is why tools are useful: with a good set of tools, the same 10 people can do orders of magnitude more work than they could without the tools. This means that tools give you leverage.

If the leverage is “good enough”, then the utility (i.e. usefulness) is clear even if the day-to-day of the work looks different.

There was once a point in time, not too long ago, where all mechanical and electrical designs were drawn on sheets of paper by hand with a pencil… Now we have CAD…

This is a much better tool but the day-to-day for someone using CAD looks different than when it was just a sheet of paper. Different on the surface, but at its core you’re trying to achieve the same thing.

With LLMs there is going to be a new generation of higher utility tools. Ultimately, they will be achieving the same things we do now, but the leverage will be significantly higher.

So, the same 10 people will be able to get a lot more work done in the same amount of time.

This is an exciting future that is worth building. see you there.